China-Nepal ties: Possible debt trap

Nepal’s ties with China have taken a great leap forward. Chinese President Xi Jinping’s visit to Kathmandu was short but significant. It is likely to transform not only Sino-Nepali relations but also Kathmandu’s equation with India as well as the region’s geopolitics. During Xi’s visit, the two sides agreed to put in place a trans-Himalayan connectivity network that will reduce Nepal’s dependence on India. China will construct a 70-km-long railway line linking Kathmandu with Kerung in Tibet. Nepal and China are reportedly hoping to extend the Kerung-Kathmandu rail to Pokhara and Lumbini, two tourism sites in Nepal. The rail link will provide a boost to Sino-Nepali trade and tourism. China has also agreed to build a road between Kathmandu and Rasuwagadhi that will halve the distance between the Nepali capital and Nepal’s northern border. A landslide on the Kathmandu-Tatopani road during the 2015 earthquake shut off that route. The Kathmandu-Rasuwagadhi road will provide Nepal with an alternative overland route to its northern border.

Nepal signed on to the Belt and Road Initiative in 2017 and since then the Nepali people are looking forward to improved connectivity infrastructure. China’s infrastructure network into and across Tibet is growing rapidly and by hooking Nepal onto Tibet’s network, China will provide the Nepali people connectivity with the rest of China and also the world. Hitherto, landlocked Nepal has depended on India as its window to the world. The downside to such dependence was underscored to the Nepali people during the 2015 blockade when goods from and through India to Nepal were shut off. It prompted a desperate Nepal to turn to its northern neighbour. China, which has been looking to cross the Himalayas into Nepal, will be hoping that someday soon its roads and rails will enable its overland entry to the vast Indian market.

Xi’s visit promises to improve Nepal’s connectivity, economy and options. However, Kathmandu must tread carefully. It should avoid falling into a debt trap the way Sri Lanka did. Importantly, Nepal should be aware that China’s main interest in the new ‘strategic relationship’ with Nepal has to do with Beijing’s security interests. There are around 20,000 Tibetans in Nepal and several hundreds are entering the country every year. China is worried that some of these Tibetans will engage in subversive activity in Tibet. It wants Nepal to crack down on the community. Although Nepal resisted signing an extradition treaty with China during Xi’s visit, Beijing will persist on the matter. During Xi’s visit, the two sides signed an agreement on cooperation between their law enforcement agencies. This is the first step towards greater co-operation relating to intelligence sharing, dealing with threats, etc.